Innovation, Social Risk and Political Responsibility

by Jonny Hankins

Innovation is on everyone’s lips today. However, people often confuse innovation with discoveries or new developments, and little thought is given to the conceptual difference between innovation and change. And we rarely have a clear idea of the relationships between innovation, change, risk and responsibility. Only very occasionally do we consciously address the serious political problems that the management, or non-management, of innovation can engender. Far too often, the problem of the independence – and hence the responsibility – of researchis erroneously confused with the independence and responsibility of innovation.

These are two very different problems: research and discovery are not the same thing as innovation. A discovery becomes innovation only when the increase in “knowledge” implicit in every discovery becomes technology and the actuating power (that is, social capital) that the discovery implements. As Schumpeter and Nelson have argued, it is only then that we obtain an increase in social power, which is in itself a factor of change and, thus, of social risk.

Real innovation is neither discovery nor novelty, but rather the agent of a new scenario, the result of a new combination of knowledge and power.

For it to qualify as “creativity” as well, change must also be to some extent unpredictable. It is for this reason that we at the Bassetti Foundation for Responsible Innovation speak of innovation as the “realisation of the improbable”. It combines risk and opportunity, changing the world around us but doing so in an intrinsically unpredictable direction. It may be an unpredictable change at the political or social level (such as new institutions, new approaches to relations, production, war or power) or at the technical and economic level (new materials, new energy sources, new instruments, new kinds of goods) or even at the cultural level (new styles, fashions, tastes and attitudes).

Innovation does not involve unpredictability alone. It also encompasses a second theme social risk.

We use this in the same way as well-known thinkers such as Ulrich Beck or Anthony Giddens: Beck has written that the concept of risk is a modern concept, which assumes the presence of danger, while Giddens has noted that it replaces the concept of chance. A society of innovation, and therefore a society of risk, is forced to make difficult choices aimed, as Beck writes, at making the unpredictable consequences of choices, made in the name of progress, predictable and controllable.

This brings us to a third element, political responsibility.

The concept of responsibility has at least two meanings: one moral, the other objective. We have elected to stand apart from the ethical debate and focus our attention on the decisions that regard the political implicationsof innovation.

Of course, this does not exempt us from examining the difficult choices that Beck refers to. On the contrary, it leads us to the heart of the problem of who is responsible for assessing social risk in innovation: the scientist who discovers, the intellectual who invents, the technologist who builds, the capitalist who finances, the entrepreneur who combines the factors of production, the legislator drafting laws or the politician wielding the tools of executive power?

As Beck rightly points out, Parliaments do not vote on the use and development of microelectronics, genetic engineering and so on. At most, they vote on supporting all of this. Nor is political power always able to assume political responsibility for the actions of the entrepreneur or firms, if it is precisely the intimate connection between decisions regarding technological development and investment that forces companies to forge their projects in secret for competitive reasons. As a result, the decisions reach politicians and the public only after they have already been taken.

In other words, are the decision-making methods of existing democratic institutions, which are based on the achievement of majority consensus, appropriate for prior assessment of situations like innovations, which by definition involved changes in “improbable” social powers and knowledge?

But if they are not, and politics is specialized in legitimizing consequences that it did not cause and could not realistically prevent, who is responsible?

Our thesis could be reformulated as follows: if innovation is change, if it introduces new opportunities, but also new risks, into social life, if it changes history, then the agent of that innovation (a person, a firm or an assembly) is acting politically and the related responsibility cannot be removed from democratic control.

However, in reality this is often not the case.

Can we allow politically irresponsible innovation in a democratic society? Can such responsibility be distributed indiscriminately between the entrepreneur (whose responsibility is at most implicit, namely that linked to success in the market) and the market in all its indeterminacy?

Maybe that the best way to respond to the sweeping questions raised by reality is to look for answers in the tangibility of experience.

One possible approach is to look at these issues from the point of view of an insurance company. We are probably all familiar with Allianz: a major insurance group that, not only in terms of size but also in its long traditions, can be considered one of the leading actors in managing social risk through insurance methods.

We might take the terrible example of the events of 11 September 2001.

Allianz had a major exposure towards the World Trade Center and the business conducted within it, which obviously generated significant losses. The total of all insured claims related to the September 11 terror attacks were somewhere around 40 Billion US Dollars while the sum of Allianz Group’s obligations stemming from the attacks is estimated at 1.5 billion US Dollar net of reinsurance. However, these are just estimates. For further discussion and estimates see this article on CBS News Money Watch by Lindsay Blakely.

The initial question for the insurance executives was: “Can Allianz insure skyscrapers any longer?” The event called into question the entire framework of social risk and the collateral effects associated with the new vulnerability of buildings like the Twin Towers and, more generally, buildings with symbolic value.

The attack had irreversibly changed the responsibility to stakeholders of an insurance company exposed to risks such as skyscrapers or other symbolic buildings. The episode revealed that the liabilities in this case were not just the settlement of the various claims for damages but also the simultaneous fall in the market value of the assets backing those risks. As Lutz Cleemann notes, “in financial terms the loss in investment far outstripped the insurance loss.”

Cleemann’s comment is really the crux of my argument in this post, as I believe it is relevant to many other forms of innovation.

Although this example is fortunately out of the ordinary, I would argue that the issues raised by this particular innovation are analogous to issues raised by innovation in general. The questions posed by Allianz in the case of the Twin Tower attack are the same as those raised by nanotechnology, banking, pharmaceutical research trials and many other forms of business innovation.

When we look at social risk and political responsibility in innovation, we are obviously not talking about terrorism, but as the banking debate and global slowdown demonstrate, innovative approaches to business can have serious consequences, some of which although unseen and unintended have global effect and responsibility.

We at the Bassetti Foundation would argue that the meeting between the knowledge and the power of an act leads the traditional concept of responsibility into crisis. The lines upon which responsibility can be drawn are blurred, and the future effects of any action are by definition unknown.

The ecosystems within which innovators live are imbued with risk, and this factor leaves them outside the “cages” of operational standards. Our mission is, therefore, to help risk takers inject awareness and intelligence into their innovation processes.

Jonny Hankins works for the Bassetti Foundation for Responsible Innovation in Milan, researching and writing articles for the Foundation website. Trained as a sociologist at the Victoria University of Manchester UK, his interests range from innovation within the renewable energy sector, bio and medical ethics and the role of politics within innovation, to questions of ethical and moral responsibility. He is currently living in Boston Massachusetts where he is working as a research assistant. He is also a professional musician, actor and street performer.